The Alignment Trap

In a 2007 study from Bain & Company, where senior and business executives from 504 companies participated, nearly 3/4 answered that they believed that their IT capabilities was neither highly aligned with their business goals nor highly effective. These companies are found in the Maintenance zone. Average IT budget and a business growth 2% below average, which can be seen below.

7% of the companies has achieved what we call IT-enabled growth, where they spend 6% less than average to have a growth rate 35% above average.

Interestingly enough, 8% of the companies, those who have effective IT capabilities but not highly aligned with business, achieve a growth rate 11% above average at a cost 15% below average. They achieve this because they have Well-oiled IT machine.

Here comes the scary part: The 11% who are highly aligned with business but less effective on the IT side spend 13% more on their IT budget than average, to achieve a growth rate 14% lower than average!. These companies are caught in the Alignment trap.

What does this tell us?

Even though the study dates back to 2007, it still holds true, especially when it comes to companies within the ‘old and established’ IT organisations, mainly within the financial and insurance sector. What it tells us is, that the most efficient path to IT-Enabled growth is via Well-oiled IT. That holds true whether you are lingering in the Maintenance Zone or caught in the Alignment Trap. This means that you have two choices on how to become a cost effective IT organization that is highly aligned with business: